P&I Clubs informed that, from time to time, operators have been offered contractual terms with counterparties that require the shipowner to provide a continuing warranty of seaworthiness for the entire duration of the voyage. In such cases, the Club suggests operators to be careful before entering into contract terms, since it could prejudice their P&I cover.
Cover for cargo risks is conditional upon the operators not contracting on terms less favourable than the Hague Visby Rules (HVR). Article III paragraph 1 of the HVR says that the carrier must, before and at the beginning of the voyage, exercise due diligence in order to:
- Make the ship seaworthy;
- Properly man, equip and supply the ship;
- Make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.
According to the HVR ‘exercising due diligence’ means taking all reasonable precautions to ensure that the ship is fit for voyage. The carrier does not have to give an absolute guarantee of seaworthiness and the ship need only be seaworthy at the beginning of the voyage.
As the West of England P&I Club said, if a cargo owner can prove that their loss was caused by a failure of the carrier to exercise due diligence to make the ship seaworthy before and at the start of the voyage, the resulting loss will fall under Club cover.
However, if the loss was shown to have been caused by some event which affected the vessel’s seaworthiness only during the voyage then, assuming the due diligence test in Article III paragraph 1 is passed, the carrier would not be liable to the cargo interests under Article III paragraph 1 of the HVR.
A continuing warranty of seaworthiness throughout the voyage changes that position and would make the carrier potentially liable for any and all events affecting the vessel’s seaworthiness during the entire voyage. This would represent terms less favourable than the HVR and place any resulting claims outside of Club cover.
Operators are advised to give serious consideration to the potential ramifications on cover of contracting on terms that give a continuing warranty of seaworthiness and to contact the Managers for guidance before fixing on this basis.